The Fed’s beige book economic survey of its 12 regional banks, which was released Wednesday, indicates that economic activity continued to expand in the last weeks of the year, with 11 of the 12 banks indicating either moderate or modest growth and the Dallas Fed reporting “robust” growth over the six-week period that ended Jan. 8.

“The outlook for 2018 remains optimistic for a majority of contacts across the country,” the report said. “Most districts reported little growth in home sales due to limited housing inventory. Nonresidential activity continued to experience slight growth. Most manufacturers reported modest growth in overall business conditions.”

Several regions noted a decline or stagnation in loan demand however, with the New York Fed reporting a decrease in refinancing activity and “weakening demand for consumer loans, residential mortgages, and C&I loans,” though commercial real estate loan demand remained unchanged. The Philadelphia Fed described loan demand as modest, while the Cleveland Fed cited one accounting executive who said they had conducted more merger and acquisition activity in 2017 "than in the past five years combined.”

The Richmond Fed said that lending activity was buoyed by strong commercial demand amid tepid loan demand in other sectors, while the Atlanta Fed noted that banks are reporting greater difficulty in raising deposits. The San Francisco Fed cited a similar phenomenon, with “demand for deposits outpaced supply, pushing up deposit rates” while “interest margins remained narrow.”

The St. Louis Fed noted a 7% increase in outstanding loan volume over the same period last year, though that growth had leveled off by the end of the year. The Dallas Fed reported that 40% of its bank respondents said their loan volumes had increased over the previous year.

Some Fed banks said that the recently passed tax bill has had an impact or is expected to have an impact on economic conditions. The Cleveland Fed reported that one respondent indicated that their closure rates for new loans had declined, and attributed that phenomenon to “seasonal factors and uncertainty spawned by political activity at the federal level.”

The Boston Fed, meanwhile, said its respondents are concerned that the tax legislation could have a negative impact on homeownership and increase costs for homeowners.

“Despite high prices, contacts expressed confidence about the residential outlook,” the Boston Fed reported. “However, many contacts indicated that new legislation passed by Congress could discourage homeownership, as shrinking the cap on the mortgage interest deduction for primary homes and the loss of most deductions for interest on home equity loans will increase costs for most property owners.”

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